HMSP
Contact our analyst Eka
Hold, 11% upside
4th November 2021
Price Rp 1,000
Target price Rp 1,105
4th November 2021
Price Rp 1,000
Target price Rp 1,105
Positive Sales Growth
- With higher volume in 3Q2021, HMSP’s sales increased +8% YoY or 3.4% QoQ to IDR 24.87 trillion. In 9M2021, sales increased 7% YoY to IDR 72.5 trillion.
- Export sales improved with 23% YoY growth but are still below earlier quarters as the global market remains challenging.
- HMSP maintained positive-growth for domestic sales with +8% YoY growth to IDR 24.8 trillion in 3Q2021.
- Machine-Made Kretek (SKM) had the fastest growth of 10% YoY to IDR 16.3 trillion in 3Q2021. Hand-rolled Kretek (SKT) sales grew a small +0.6% YoY but were higher by 12.5% QoQ to IDR 5.89 trillion and Machine-Made White (SPM) increased +4.2% to IDR 2.32 trillion.
- The sales volume growth continues in 3Q202, and we expect more growth in the next quarters inline with a recovery in domestic consumption.
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3Q2021: Margin downtrend
- HMSP margins continue to decrease QoQ. The increases in excise tax and the government plans to increase excise tax next year are still weighing on the sector.
- Despite single-digit-growth in sales in 3Q2021, HMSP net profit decreased by -30% YoY or -8% QoQ to IDR 1.42 trillion. As a result, HMSP net profit margin declined to 6% from 11% in 1Q2021.
- For 9M2021, net profit declined by -20% YoY to IDR 5.55 trillion.
- HMSP’s cost of sales increased +13% YoY or +3.5% QoQ to IDR 20.9 trillion in 3Q2021. This resulted in a lower gross profit -13.2% YoY to IDR 3.89 trillion with a lower gross profit margin of 16% from 20%.
- Profit before tax decreased by -30% YoY to IDR 1.8 trillion.
- With the recovery in sales volume, we expect HMSP’s sales will grow +7% YoY to reach IDR 99 trillion.
- However with negative sentiment from higher excise tax and no improvement in margins, we expect a lower net profit -14% of IDR 7.42 trillion.
- We are targeting HMSP to trade at a 16x 2022F PE within a year. Target Price is IDR 1,105 which represents 11% upside. Our recommendation is HOLD.
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